GT spent near 3 hours going over their new technology and painted a tremendously positive picture for GT’s future. I wasn’t there in person but you could tell TG’s swagger was in full gear. He was excited, very excited, so excited, the most excited he’s been in his 5 years with the company, so excited he even chose to dress up for the occasion and leave the jeans at home. The event also celebrated the “new GT” and discussing adding well over $3b of potential market share for the company.
I’ve updated my revenue model based on the Technology update on March 14. TG made it clear that he does not bring new products to market until the market is ready. With that said there will be additional items brought to market by 2016 and 2017 but at this point they are not included. It is also likely that Apple will adopt sapphire covers for the iPad in the future, whether they are sapphire laminates on some sort of glass or pure sapphire covers like the iPhone and iPod. In additional to Apple, I fully expect GT to enter the sapphire laminate material business and those revenues are not included in my current model. Additionally, TG acknowledged there are additional products in R&D that they are working on as well and they will continue to invest in R&D spending 4x what they used to spend (consistent with what we saw in 2013).
Merlin – GT expects to receive their first PO for Merlin in 2H2014. GT’s estimated peak market share of 20% by 2018 might be very conservative, as TG pointed out “the potential is staggering”. GT made a point on the call that, “once solar was in the bag” for Merlin they would move into other markets. TG indicated that once penetration hits over 20% for Merlin they would likely look to bring this production back to the US and open up a plant of some kind to get an additional piece of the pie. Merlin customers so far have been saying “we want it tomorrow and we want exclusive rights,” at this point GT is not granting any exclusive rights to the product. Merlin Technology is also agnostic to the specific cell design and offers efficiency improvement either way. A product that offers a 10%+ cost savings, half the weight, twice the flexibility and more efficient design sounds like a game-changer to me!
HiCz – GT has pulled forward this product and is expecting an order of substance to be received in 2014. I expect revenue recognition beginning in 2015 related to this order.
Mono/Poly Crystalline Markets have come back faster than TG thought and this is reflected in the DSS and SDR revenue expectations beginning in 2015. GT’s product offer the lowest capital cost per kg in the market. It is no wonder they remain confident to win every bid they are involved in related to Polysilicon Production Facilities.
Hyperion – Working with Tier 1 Power Device Manufacturers for SiC. Engaged with lead LED customers for downstream LED. Working with a lead Solar customer in Asia. Working with Military and Medical industries and expect to see a purchase order in 2014. Hyperion 4 can produce 10x more power than any existing implanter tools on the market and GT is pricing their technology at the same ASP $ level as competitor implanter tools on the market. Hyperion 3 took 200 man years to assemble and GT has moved from the Hyperion 3 to the Hyperion 4, which produces 2 mega electron volts up from 1 mega electron volts, that could be found in the Hyperion 3. The technology is protected by 55 patents and 25 more that are pending. The current patents are across the entire solution, application, process and equipment. This is the only exfoliating machine on the market because of it’s unique design and power.
My 2015 and 2016 estimates have not changed significantly from what I had before the 3/14 Technology Conference. My margin has improved based on comments from TG regarding Hyperion and that it would carry “superior margins” to GT’s historic rates because no one else has a product like it in the marketplace.
Updated Revenue & EPS: 2015 $3.177 B – $2.84 EPS, 2016 $4.736 – $5.26 EPS
Previous Revenue & EPS: 2015 $3.177B – $2.74 EPS and 2016 $4.416B – $4.26 EPS.
~Obscure Analyst 3/16/14
I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours (or even 3 years based on this forecast!)